Income Lifetime Mortgage

Your Comprehensive Guide to Understanding How an Income Lifetime Mortgage Works

Contributors: Nicola Date, Katherine Read. Reviewed by Francis Hui

How Can You Get Lifetime Mortgage Relief? Here's All You Need to Know About Income Only Lifetime Mortgages. Choose the Best Equity Release Plan Now...

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What’s an Income Lifetime Mortgage?

A Complete Guide to Income Lifetime Mortgages in Dec 2021

Don’t get caught in a terrible financial situation when there could be an easy solution!

Life after retirement can be difficult, especially if you don’t have enough money to support your needs or to keep up with your pre-retirement lifestyle.

Great news! That’s where income lifetime mortgage plans come in.

We’re here to help you discover:

  • An introduction to income lifetime mortgage plans.
  • How they work in Dec 2021.
  • Income lifetime mortgage plan qualification criteria.
  • The expenses involved.

We’ve spent hours studied plans from over 25 of the best equity release lenders and we’re here to give you sound advice. Now, let’s get into income lifetime mortgages right away!

What’s an Income Lifetime Mortgage Plan?

An income lifetime mortgage plan is a type of equity release scheme that allows you to top up your retirement income. This is possible through a fixed income paid into your account monthly.

Not what you’re looking for? Discover: Types of Lifetime Mortgage Schemes

The Mechanics of an Income Lifetime Mortgage Scheme

Every equity release works in almost the same manner. You get to unlock the equity tied into your home. Nothing is owed during your lifetime. The loan, plus fixed-rate compound interest is then repaid from the sale of your home when you pass away or move into permanent care.

In the case of an income lifetime mortgage, the funds released are then paid into your account monthly.

Here are the best rates for a lifetime mortgage as of Dec 2021!

The income is seen as a loan and not a salary and is, therefore, completely tax-free.

If you don’t require a substantial quantity of money right now, but could benefit from excess finances in your pocket every month, an income plan could be your best option. However, since this plan is new to the equity release market, the companies that can offer it to you are limited.

4 Qualification Criteria of an Income Lifetime Mortgage

As with other schemes, the income lifetime mortgage plan’s qualification criterion in Dec 2021 is dependent on:

  • Your age
  • Your property portfolio
  • The lender’s requirements
  • The condition of your health

According to most lenders’ criteria; however, the minimum initial amount you can take out is £2,500 to assist you in covering the set-up charges, up to a maximum 10% of the amount you borrow.

The minimum income payment is usually £200 per month, and you have several options to get this over 10 to 15, or 20 to 25 years.

Your estate also needs to have a minimum value of £100,000, and the youngest homeowner must be over 55 years to qualify.

Here’s an indication of how this plan can work across the 3 different income plans that Legal & General offer their consumers in Dec 2021.

Let’s say, Liza Gödel is 60 years of age, her estate has a market value of £500,000, and she opts to take out a 20-year income term and chooses to take out the maximum initial loan.

Legal & General’s Plans as of Dec 2021

Plan Name Max Loan Max Initial Loan Max Monthly Income
Income Plan £137,500 £13,750 £555
Income Plus £159,000 £15,900 £645
Income Max Plus £216,000 £21,600 £883

As you see, Liza can opt to get the monthly payout between £555 and £883.

Get a better perspective and try our free online lifetime mortgage calculator!

5 Costs Associated with Income Lifetime Mortgages

Like other lifetime mortgage schemes, before going ahead to take out a plan, it’s vital that you know the expenses associated.

In Dec 2021, these can include:

  • The financial adviser’s3  fee – they help you set up your income lifetime mortgage plan.
  • An arrangement fee to the plan provider – to cover their administration and legal fees.
  • The solicitor’s4  fees – for legal advice.
  • Property valuation fees – the surveyor fees.
  • The completion fee – you can pay at the point of fulfilment or add it to the final mortgage amount.

As with most lenders, these costs can tally up to about £1,500-£3,000. You might also have to pay more charges if you opt to make ‘early repayment charges.’

In Conclusion

Each year, £3.5bn in benefits remain unclaimed by UK retirees. You are likely entitled to benefits, but if you’ve claimed yours, and they’re still not enough, an income lifetime mortgage plan could be the solution.

If your income is limited and you want to keep up with your lifestyle, then it may be the best option for you. The best part is that you’re not restricted on how you can use the sum.

Call up your financial specialist for expert advice today to get the ball rolling. Your life could change forever.

Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

rachel w

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
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Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
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Katherine Read
Consumer Affairs Writer

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.

Nicola Date
Writer & Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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